The ongoing legal battle involving the FTX crypto exchange has taken a new twist as the U.S. Securities and Exchange Commission (SEC) intensifies its investigation. The latest development involves the parents of Sam Bankman-Fried (SBF), the founder of FTX. John Jay Ray III, the corporate turnaround expert overseeing FTX‘s bankruptcy, has previously accused SBF of “old-fashioned embezzlement.” Now, SBF‘s parents, Stanford law professors Joseph Bankman and Barbara Fried, are sued by FTX.
A lawsuit filed by FTX in a Delaware federal court alleges that the couple used their “access and influence within the FTX enterprise to enrich themselves.” The lawsuit seeks to recover millions of dollars they allegedly received from their son.
According to the lawsuit, the couple received a $10 million cash gift and a $16.4 million home in the Bahamas from their son. The home was reportedly purchased by the exchange. The lawsuit further alleges that Joe Bankman attempted to conceal complaints against his son’s business while Barbara Fried advised FTX executives on evading political donation disclosure requirements. The couple’s lawyers have refuted these claims, labeling them as “completely false.” They view the lawsuit as an attempt to intimidate them ahead of their son’s impending trial.
FTX‘s legal troubles began when it filed for bankruptcy protection last November after discovering a significant shortfall in its accounts. SBF was subsequently charged with using customer deposits for various unauthorized purposes, including venture capital investments and luxury real estate purchases. He has pleaded not guilty and is set to face trial on October 3rd.
The lawsuit also delves into the involvement of Joe Bankman and Barbara Fried in FTX‘s operations. Joe Bankman, a tax professor, was an FTX employee and played a significant role in the company’s philanthropic activities. Barbara Fried, on the other hand, managed a political donor network financed by her son.
The lawsuit cites several instances of alleged misconduct. For example, Joe Bankman reportedly expressed dissatisfaction with his $200,000 annual salary, expecting it to be $1 million. Following this, he received a $10 million gift from his son. The lawsuit also claims that Barbara Fried advised her son on making “straw donations” to circumvent federal campaign finance rules.
The SEC’s investigation into FTX has been extensive, with the regulator accusing the exchange of various infractions, including misrepresentation of trading controls. The recent focus on the founder’s parents adds another layer to this complex legal saga, highlighting the extensive reach of the SEC’s probe.
The outcome of this lawsuit and the broader investigation into FTX will undoubtedly have significant implications for the crypto industry and its regulatory landscape.
